Existing-home inventory remained near record lows at 980,000 units in February, according to data from the National Association of Realtors. Similarly, new single-family home inventory stood at 8.2 months’ supply, down for the fifth straight month in February.
“Builders continue to face challenges in terms of higher interest rates, elevated construction costs and access to critical materials like electrical transformers,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB). “Nonetheless, the lack of existing home inventory means demand for new homes will rise as interest rates decline over the coming quarters.”
“The February new home sales data points to an increase for the monthly pace of single-family construction starts later in 2023 given a rise in builder sentiment and an increase for sales of homes not yet started construction,” said NAHB chief economist Robert Dietz. “However, concerns remain about the tightening of credit conditions for acquisition, development and construction loans for smaller builders due to recent stress for the banking system.”
The median new home sale price grew 2.5% year over year to $438,200 in February. NAHB estimates that roughly 15% of new home sales a year ago were priced below $300,000, while that share is now just 10% of homes sold.
“Looking ahead into March, it will be interesting to see if the cloud of economic uncertainty most recently caused by bank failures will cause buyers to falter or if it will dissipate as the traditional spring buyers with larger budgets come out in full force,” Mangold said. “Demographic drivers continue to be strong in pushing for demand for more new home sales.
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